Reforming Public Housing


Current Issues Brief 31 1996-97

Greg McIntosh
Social Policy Group
16 June 1997

Contents

Major Issues Summary

Introduction

The Commonwealth-State Housing Agreement (CSHA)

Brief History
Recent Commonwealth Budgets
1995-96
1996-97
1997-98

How Successful Has the CSHA Been?

Accessibility
Appropriateness
Affordability
Security of Tenure
Equity

Some Suggestions for Reform

The Industry Commission (Public Housing-November 1993)
The Australian Council of Social Services (ACOSS)
The National Housing Strategy
The Australian Institute of Health and Welfare

Recent Moves towards Reform

The Keating Government
The Howard Government

Conclusion

Endnotes

Appendix: Commonwealth Housing Reform Facts and Figures


Major Issues Summary

Reform of public housing in Australia has been prominent on the political agenda recently, most particularly through deliberations of the Council of Australian Governments (COAG). In the parliamentary context a Senate Committee (Community Affairs Reference Committee) is also currently holding an inquiry into Federal Government proposals for reform to the public housing system.

This paper concentrates on the provision of public housing under the auspices of the Commonwealth-State Housing Agreement (CSHA). The first CSHA came into force in November 1945 and since that time it has been the main vehicle for providing public housing to Australians. It is estimated that there are 386 000 public dwellings in the eight States and Territories, the combined value of which is of the order of $31 billion. Besides the CSHA, the Commonwealth's other main program designed to help low income earners access housing involves the payment of rent assistance to private renters.

The bulk of the funding provided under the CSHA is in the form of capital grants, and the States and Territories have a host of housing and housing related schemes that come under the ambit of the CSHA including schemes for public housing, community housing, loans for home purchase and rent assistance. The 1996-97 Federal Budget allocated $1057 million to the CSHA under the following programs: a base funding category ($862m), Aboriginal Rental Housing ($91m), Community Housing ($64m) and Crisis Accommodation ($39.7m). The 1997-98 Budget saw Commonwealth funds for the CSHA reduced to $975m for the forthcoming financial year with a further reduction to $964m forecast for 1998-99. However, the Government has said that the 1996-97 funding levels for the Aboriginal Rental Housing Program and the Crisis Accommodation Program will be maintained.

Five key concepts have been identified as approximate indicators of CSHA performance: accessibility, affordability, appropriateness, security of tenure and equity. A brief review of the evidence appears to indicate that the CSHA is performing reasonably well in terms of these indicators with the exception of the one which is arguably the most important, accessibility. An analysis of statistics relating to waiting lists for public housing and the number of recent additions to waiting lists for public housing shows that there is a substantial shortfall in the provision of public housing dwellings.

A number of suggestions for reform to the CSHA have come from various quarters in recent times. For example, the Industry Commission has recommended that there should be greater transparency and accountability mechanisms in place for the State housing authorities; that there be a better delineation of responsibilities between the Commonwealth and the States such that the States become fully responsible for the purchase and construction of public housing and the Commonwealth concentrate on the provision of income support for all Australians; that specific and measurable performance indicators be introduced for the CSHA; and that the State housing authorities fully separate their functions of property and tenancy management.

The Australian Council of Social Services (ACOSS) agrees that a series of performance based agreements should be introduced that will allow the performance of the CSHA to be more properly assessed. ACOSS has also advocated that the needs of tenants should be better addressed through the introduction of local tenancy management and through the provision of nationally uniform appeals mechanisms and tenancy legislation, and that the Commonwealth should play the main role in terms of funding, planning and performance monitoring whilst the States ensure that property management, tenancy services and asset management are undertaken to agreed national standards.

Recent proposals for public housing reform have been largely driven by the Council of Australian Governments (COAG) process. At a meeting of State Premiers and the Commonwealth in April 1995 it was agreed that there should be a major overhaul of the public housing system - an overhaul that includes many of the proposals for change advocated by the various reports and studies done in the early to mid-1990s. At the end of 1995 the Keating Government announced a radical plan to transform the delivery of public housing in Australia. The main thrust of this plan included the Commonwealth taking full responsibility for all rent assistance (including rent assistance to both private and public renters) with the States and the private sector being responsible for the supply of public housing in their respective jurisdictions. The proposed reforms also included a provision to allow rent assistance to be converted to a lump sum to be used for a deposit for home purchase, greater private sector involvement, a reduction in housing industry regulations, an 'evening out' of the subsidy provided to private and public renters, and differential rates of rent assistance depending on geographical location and state of the real estate market.

The general thrust of the reforms outlined by the Keating Government were picked up by the incoming Howard Government in March 1996. In September 1996 the Housing Ministers from the Commonwealth and the States and Territories agreed to continue with the reforms including a commitment that all new public housing tenants should be asked to pay no more than 25% of their incomes in rent and that no existing public housing tenants should be disadvantaged by the new reforms. The Ministers also agreed that neither level of government should be disadvantaged and that the proposed reforms should be revenue neutral.

However, since that time the details of how these reforms are to be implemented have not been agreed upon and the whole reform process has stalled. The States and Territories are concerned that they may be worse off financially as a result of the reforms and are not prepared to agree to a new system until the fine detail of the proposals is put on the table. Given that a Senate committee is currently holding an inquiry into the proposed reforms (with a reporting date of 30 September 1997) it is highly likely that the proposed reforms will not be finalised and agreed to until 1998.

The key challenge for the Commonwealth is to come up with an acceptable package that is adaptable and flexible enough to be able to take into account any unforeseen negative consequences that may arise from the reforms proposed. If the new package, when it is agreed to, has allowances for future adjustments and 'fine tuning' then any shortcomings may be able to be addressed as they arise. This is particularly important because the housing reforms are likely to impact in different ways in different areas of Australia and because they are likely to have a different impact on people depending on their circumstances.

Introduction

The quantity, quality and location of housing is of vital importance to all Australians. Having a 'roof over the head' is considered to be one of the basic necessities of life. In economic terms housing accounts for 4-6% of Gross Domestic Product per annum and approximately 20% of gross investment per annum.(1) In social terms, where people live (and how they live) has an important bearing on their sense of self-worth and how they are viewed by others.

Approximately 70% (42% owners, 28% purchasers) of Australians live in owner occupied homes, approximately 19% live in private rental accommodation, and 6% live in public housing. The remainder are accommodated in a diverse number of other ways, including caravans and boarding homes, or are homeless.(2) Australia has one of the highest rates of home ownership in the world. For example, the equivalent figure for owner occupied houses is 68% in England (1990), 64% in the United States (1988) and 62% (1986) in Canada. The equivalent figures for private rental are England 8%, the United States 34.5% and Canada 32% whilst the figures for public housing are 24%, 1.5% and 6% respectively.(3)

Assistance from governments to people in housing need in Australia comes from two main sources - the provision of public housing and the provision of rent assistance to low income tenants in private dwellings. It is estimated that the total direct expenditure on housing assistance by the Commonwealth in 1994-95 was $2 520 million, consisting of $1 067 million in payments to the States and Territories via the Commonwealth-State Housing Agreement (CSHA) and $1 453 million in Rent Assistance that was paid to those on low incomes in the private rental sector.(4) As at June 1995 there were 388 601 public housing dwellings in Australia and there were 234 667 applicants on the State and Territory waiting lists for public housing.(5) The length of waiting lists for public housing has grown substantially over time. For example, in 1984 there were 140 684 applicants, in 1988 there were 198 063 applicants and in 1993 the equivalent figure was 232 208.(6) Approximately 45% of Australian households which rent privately receive rent assistance (see Appendix).

The scope, effectiveness and equity of current and past provision of public housing has been the source of considerable debate in recent years. This debate has been highlighted in the very recent past by the deliberations of the Council of Australian Governments (COAG) and the release of several major reports on public housing including that of the Industry Commission (November 1993), the Australian Council of Social Services (June 1994) and the Australian Institute of Health and Welfare (January 1995). As well, the National Housing Strategy process of the early 1990s dealt with all aspects of housing provision in Australia, including public housing. The emphasis of this paper is on public housing, which is taken to include housing provided under the auspices of the Commonwealth-State Housing Agreement.

The Keating Government, before it lost office in March 1996, had foreshadowed a major overhaul of housing assistance, which would have seen the Commonwealth taking responsibility for rental subsidies in both the public and private sectors, and the States and Territories being responsible for administering and running the rest of the public housing system. The general thrust of those proposed reforms has been picked up by the current government, but progress has been slowed due to a lack of agreement between the Commonwealth and the States on precisely how to implement the detail of these reforms. This paper includes an analysis of the proposed reforms to public housing announced by the Howard Government.

Before examining in more detail the most recent proposals for public housing reform it is appropriate to review the operation of the CSHA to date.

The Commonwealth-State Housing Agreement (CSHA)

Brief History

The CSHA commenced in 1945 and is the Commonwealth Government's main housing program. Since 1945 a series of financial assistance agreements have been negotiated between the Commonwealth and the States with a view to providing housing assistance to people in need. Current legislative authority for the CSHA is contained in the Housing Assistance Act 1996, which provides the legal framework for the latest Agreement. This Agreement, which came into effect on 1 July 1996, is an interim agreement for up to three years and essentially allows the CSHA to operate largely as it has in the past whilst some fundamental reforms to its operation are negotiated between the Commonwealth and the States and Territories.

Initiatives by the Chifley Government resulted in the first CSHA being finalised with the six States in November 1945. The main impetus for such an arrangement was provided by the Commonwealth Housing Commission in a report it released in August 1944. The Commission was appointed in April 1943 to assess the state of Australia's housing stock. In its report the Commission advised the Commonwealth to take an active role in providing housing for those in need. Since 1945 the Commonwealth has made financial allocations to the States for this purpose. Commonwealth-State Housing Agreements were negotiated with the States in 1945, 1956, 1973, 1978, 1984, 1989 and 1996. The Northern Territory was included in the CSHA in 1981 and in 1989 the Australian Capital Territory became a party to the Agreement.

Section 96 of the Constitution, which allows for the Federal Parliament to 'grant financial assistance to any State on such terms and conditions as the parliament thinks fit', has been the legal avenue by which the Commonwealth has made available CSHA funds to the States and Territories to allow for the construction of public housing and the lending of funds for home purchase.

Recent Commonwealth Budgets

Approximately one-half of all Commonwealth funding for housing comes under the ambit of the CSHA. The rest of the funding goes primarily to:

  • rent assistance which is provided to eligible Department of Social Security and Department of Veterans Affairs clients;
  • specific programs for Aboriginals including the Community Housing and Infrastructure Program (CHIP) and Aboriginal Hostels Ltd (AHL) which are administered by the Aboriginal and Torres Strait Islander Commission (ATSIC); and
  • funding for organisations to provide residential care for the elderly, including nursing homes and hostels.

The Commonwealth also funds a number of programs which help people move into more independent living arrangements or provide for their ongoing support needs - for example, the Supported Accommodation Assistance Program (SAAP), the Home and Community Care Program (HACC) and the Commonwealth-State Disability Agreement (CSDA).

Funding currently provided under the CSHA is in the form of capital grants, mainly for the provision of public housing. The States and Territories have a host of housing and housing related schemes that are funded via the CSHA including schemes for public housing, community housing, loans for home purchase and rent assistance.

1995-96

The main areas funded in the 1995-96 Budget for the CSHA were Public Rental Housing, Pensioner Rental Housing, Aboriginal Rental Housing, Community Housing, Mortgage and Rent Assistance and the provision of Crisis Accommodation. A total of $1062 million was allocated to the various programs of the CSHA in the 1995-96 Budget.(7)

The largest program within the CSHA was Untied Rental Assistance ($762.9m) which provided finance for the construction and maintenance of public rental housing, rental subsidies for those in need and the Home Purchase Assistance Program as well as repayments of Commonwealth principal and interest up to the level of State/Territory public housing operating losses.

The Pensioner Rental Housing program provided funds ($49.8m) to assist pensioners and beneficiaries gain access to suitable accommodation.

The Aboriginal Rental Housing program provided funds ($97.1m) for the construction, purchase or lease of rental housing for Aboriginal and Torres Strait Islanders in need. The distribution of funds between the States and Territories is made according to an assessment of housing need as endorsed by the Australian Aboriginal Affairs Council. (It should be noted that a range of other forms of housing assistance for Aboriginal and Torres Strait Islanders is provided for via the Aboriginal and Torres Strait Islander Commission.)

The Community Housing Program (CHP) provided $74.3 million to enable local government, welfare and community organisations to purchase, construct, lease or upgrade rental housing.

The Mortgage and Rent Assistance Program (MRAP) provided $30.9 million for short-term assistance to private renters or home buyers who, because of their low incomes, were having difficulties with their purchase repayments or rent payments. As well as mortgage and rent relief this program also provided for deposit assistance and housing advice and referral.

The Crisis Accommodation Program (CAP) provided capital funds of $46.9 million for short-term emergency accommodation under the Supported Accommodation Assistance Program (SAAP). The SAAP Program provides support services for the residents of CAP funded accommodation. Included in the types of dwellings funded under the CAP are youth refuges, women's refuges, homeless men's shelters and short-term housing.

For various statistics on the operation of the CSHA in 1995-96, see the Appendix. This information was released by the Department of Social Security in December 1996.

1996-97

As part of the portfolio reorganisation that the incoming Howard Government instituted following the March 1996 election, the public housing function was transferred to the Social Security portfolio. This means that funding for the CSHA and Rent Assistance now comes under the purview of one Department.

The 1996-97 Budget provided for $1.057 billion to the States and Territories for the provision of housing assistance via the CSHA and included some changes to the program structure of the CSHA. The Untied Rental Assistance, Pensioner Rental Housing and Mortgage and Rent Assistance Programs have been rolled into a general base funding category. These base funds are to be used for the acquisition, upgrading or redevelopment of public housing. Some of the funds are also to be used to assist low income people to pay their rent, to help them gain access to private rental accommodation, to help them acquire deposit funds for home purchase and to help them to meet mortgage payments should difficulties arise. Approximately $862 million of the total Commonwealth funding for the CSHA in 1996-97 is included under this base funding category.

The remaining identified programs include the Aboriginal Rental Housing Program, which has been allocated $91 million for 1996-97, the Community Housing Program ($64m) and the Crisis Accommodation Program ($39.7m).(8)

According to the Government, the new Interim CSHA, which commenced on July 1 1996-

...provides for a number of reforms in the delivery of housing assistance. These include a greater emphasis on accountability and transparency through the adoption by States of a standard accounting framework, the reporting against nationally agreed objectives through performance indicators, and the need for an agreed bi-lateral strategic plan.(9)

1997-98

The 1997-98 Budget allocated $975m housing under the Interim CSHA and included a guarantee that funding for the Aboriginal Rental Housing Program and the Crisis Accommodation Program would be funded at existing (1996-97) levels.(10) The approximately $50m reduction in funding from that provided for in the previous financial year will therefore presumably come from the general base funding category although the Government maintains that this reduction in funding is a recognition of the scope for greater efficiencies that will eventuate once the proposed reforms are implemented.(11)

How Successful Has the CSHA Been?

Before looking at the other reforms to the CSHA that are currently being discussed by the Commonwealth and the States and Territories it is appropriate to briefly review how effective the CSHA has been to date.

Five general housing assistance objectives have been identified with housing provision under the auspices of the CSHA: accessibility, affordability, appropriateness, security of tenure and equity.(12) From a brief review of the evidence available, it appears that the CSHA has been reasonably successful in meeting these objectives with respect to the majority of the broad concepts listed. However, in arguably the most important field, that of accessibility, the CSHA has clearly not produced enough dwelling units to satisfy the apparent demand.

Accessibility

Accessibility refers not only to the availability of housing for those in need but also to the ease with which household units can move to similar or new forms of tenure. Certain groups may have difficulty obtaining housing due to factors such as discrimination, and this is another element of accessibility.

One of the main measures of accessibility is the length of waiting lists for public housing. However, waiting list statistics should be used with some caution because often there are many applicants listed who no longer require public housing or who are no longer eligible for public housing. Also, there are people in the community who, for whatever reason, may not want public housing but who would normally be eligible; and there will be a proportion of potential applicants for public housing who are not aware that particular form of housing tenure is available to them. It should be noted that the waiting lists are not a measure of homelessness as the vast majority of those on the lists are either in other non-public accommodation or even may be wait listed for other more suitable public housing in another area.

Even if allowances are made for the shortcomings of using waiting lists as a measure of accessibility it is still evident from the statistics that public housing provided under the auspices of the CSHA is far from adequate to meet the current demand. The national waiting list has grown by more than 60% over the period from 1985 to 1995.

The number of applicants on waiting lists for public housing in Australia has increased from 144 607 in 1985 to 200 941 in 1989 to 234 667 as at June 1995. The total stock of rental dwellings held by State housing authorities has also increased over time (from 273 465 in 1985 to 337 736 in 1989 and 388 601 in 1995) but not at a rate great enough to halt the increase in the length of the waiting lists.(13)

An alternative measure of accessibility is that of how many recent applications for public housing have been approved. If this measure is used then the apparent unmet demand is less than the waiting list statistics would indicate but there is still a substantial shortfall in the provision of public housing. According to the Institute of Health and Welfare:

Over the decade from 1982-83 to 1991-92, the number of applicants added to public housing waiting lists in a year throughout Australia tended to increase, rising overall by 36% from 86,000 to 117,000... In the same period the total population increased by 14%... The capacity of State housing authorities to meet this demand has been somewhat mixed, both over time and across States; although over the 10 years from 1982-83 the number of dwelling units in the public sector increased by 51% ... the number of new households accommodated increased by only 39%. This suggests that tenants are tending to stay longer in public housing and shows that the ability of housing authorities to accommodate new tenants depends both on the growing stock and the rate at which existing tenants leave public housing. Notwithstanding the fact that recent additions represent a conservative estimate of demand, a substantial level of demand remains unmet.(14)

More recent figures tend to confirm the above conclusion. For example, in 1994-95 there were 103 416 applicants added to public housing waiting lists and 51 638 applicants either cancelled or withdrew, leaving a net addition of 51 778 applicants.(15)

The tendency of tenants to stay longer in public housing is perhaps one area where the public housing authorities may be able to make changes to improve accessibility. As well, the general situation at present is that those longest on the waiting list are allocated housing ahead of those who have been recently listed. If more emphasis was placed on needs, as opposed to being first listed, and if more emphasis was placed on a re-allocation of housing once a particular tenants' financial situation improves, then a much fairer and better targeted regime may result.

Of relevance to any discussion of public housing accessibility is that of accessibility to the private rental sector. Policy-makers need to take into account the state of the private housing market when considering issues related to public housing, including accessibility. An adequate supply of affordable private rental housing will obviously take some pressure off public rental housing authorities to expand their supply of dwellings and policies that encourage a healthy private rental sector will have a positive impact on, for example, public housing waiting lists. In this context the general state of the economy and factors such as the level of interest rates are of direct relevance to the performance of the public housing sector. (For background, including statistics, on the private rental market see Appendix).

Appropriateness

The concept of the appropriateness of the public housing being provided is an important one. It relates essentially to the physical characteristics of the housing provided, its location and whether the housing meets the needs of the occupants. Appropriate housing can be considered to be accommodation that is of adequate physical structure - that is, of a size and type that suits the occupants - and that allows them to have access to the services and employment that they need.

In a recent analysis of this concept with respect to public housing the Australian Institute of Health and Welfare used as approximate measures of appropriateness the rate of under-utilisation of dwellings and the location of public housing in terms of access to services and employment. The Institute defined an under-utilised dwelling as one in which there were more bedrooms than were needed to adequately accommodate members of the household. Using this measure of appropriateness it concluded that the public housing sector was the most efficient of all types of housing:

...the public housing sector displayed the highest level of efficiency in the allocation of dwellings of any tenure. Although in 1990 a substantial 44% of public renter households were living in under-utilised dwellings ... this incidence was lower than in the private rental market (50%) and almost half that evident among owner-occupied dwellings (79%).(16)

In terms of the location of public housing, no definitive conclusions were drawn due to the paucity of data, although the Institute's report did note that tenants in Sydney tended to have a locational disadvantage with reference to services and employment when compared to households in the private rental market. A similar situation was found in Adelaide, but in Melbourne the Institute believed that public housing was generally considered to be locationally advantaged. A lack of data prevented conclusions being drawn about locational advantage/disadvantage in the other capitals.

Affordability

The Industry Commission defined affordability as being:

...about the relative ease, once in a dwelling, in meeting housing costs of income. The National Housing Strategy (NHS) considered housing to be 'affordable' if it did not take up too large a proportion of the household budget. That is, after paying for housing costs, there should be enough income for other necessities such as food, clothing and medical care. The NHS... recommended that eligible renters should pay (after housing assistance) no more than 25 per cent of their income on rent for adequate and appropriate accommodation.(17)

Using the 25% benchmark as a very approximate guide to affordability it appears that tenants in public housing are faring quite well when compared to other forms of tenure. Recent figures from the Australian Bureau of Statistics show that 75% of all income units which rent public housing outlaid less than 25% of their incomes on rent - 18% higher than the average for all income units which rent housing. By comparison, only 48% of income units which rent from real estate agents spent less than 25% of their income on rent.(18) These figures should be treated with caution, however, because many renters in the private sector would not qualify for public housing.

Security of Tenure

Security of tenure essentially refers to the degree to which occupants of a house have the right to continued tenure in that dwelling. Once again, on the available evidence it would appear that the providers of public housing in Australia have a relatively good record in terms of providing security of tenure to the occupants of such dwellings.

The analysis of the Housing and Location Choice and the Housing and Location Preferences surveys suggests that public housing was able to provide security of tenure to the vast majority of public tenants between 1986 and 1991. An estimated 11% of households in public housing moved involuntarily in that period, a proportion approximately half that of households in the private rental market (21%).(19)

Of course, security of tenure also needs to be assessed in comparison to other objectives, most particularly appropriateness. Perhaps security of tenure should be viewed more as 'security of tenure within the public housing system' so that as life circumstances change (for example, a couple get older and their children leave home), tenants are moved to more appropriate accommodation.

Equity

The concept of equity is a complex one, but any assessment of equity would have to evaluate whether or not the provision of scarce public housing resources was going to those most in need. Apart from the obvious problem of there being no agreed method of determining 'need', very little statistical data is available to enable firm conclusions to be made on just how equitable the current provision of public housing in Australia is.

One measure of 'need' is to look at the proportion of those in public housing who are in receipt of a government payment or benefit. ABS statistics show that 78% of income units which rent from a State or Territory housing authority have a government pension or benefit as their main source of income. The statistics also show that 62% of income units renting State/Territory housing authority dwellings have gross weekly incomes of less than $289.(20)

These figures do appear to indicate that the bulk of public housing is being utilised by those who could be categorised as being in 'need'. However, it could also be argued that there is still likely to be some potential tenants on the waiting lists that have a greater 'need' than those currently occupying public housing dwellings. The challenge to the public housing authorities is to come up with the 'best' mix of balancing equity concerns with those related to security of tenure and accessibility. This is particularly difficult in a situation where there is a general shortage of available and suitable accommodation.

Some Suggestions for Reform

The Industry Commission (Public Housing - November 1993)

The Commission's main task was to report and make recommendations on how the three levels of government can deliver public housing and rent assistance in the most efficient and effective way possible. It was of the view that:

public housing is a cost effective way to meet government housing objectives. But people have a variety of housing needs. In addition to public housing the appropriate mix of assistance measures is likely to include rent assistance, community (including co-operative) housing, and headleasing - that is, the leasing of a property by a housing authority or community group for on-leasing to a tenant. The need at this stage is for funding and institutional arrangements and incentives that will allow the right mix of assistance measures to emerge.(21)

Some of the specific recommendations and points made by the Industry Commission included:

  • that there is still a long way to go with respect to government provision of housing for those in need;
  • that the key objectives of the CSHA (accessibility, affordability, appropriateness, security of tenure and equity) are 'ideals' that are not linked in any measurable way to the performance of the various State and Territory housing authorities;
  • that there should be greater transparency and accountability mechanisms in place for the housing authorities;
  • that a better delineation of responsibilities between the Commonwealth and the States should be introduced such that the States become fully responsible for the purchase and construction of public housing. The Commonwealth's main role should be to provide income support (essentially via block grant rent assistance to the States) for all households in both public and private rental. The Commonwealth should also provide specific support to encourage housing provision in particular States for, say, community housing initiatives;
  • that all applicants for public housing should be assessed in the same way and that each State should have a categorised waiting list so that allocations recognise the different degrees of need;
  • that public housing security of tenure should be considered in the context of the 'local' area as opposed to a particular dwelling;
  • that rents should be linked to market values and that the level of assistance given to tenants should be dependent upon tenant incomes;
  • that the various State and Territory housing authorities should fully separate their functions of property and tenancy management;
  • that the level of assistance for tenants in community housing should be similar to assistance provided to those in public housing;
  • that the housing assistance provided to Aboriginal and Torres Strait Islanders should be at least at the same level as that provided to other public housing tenants; and
  • that the Commonwealth should come to an agreement with the States and Territories on the funding responsibility for the housing costs for Aboriginals and Torres Strait Islanders that exceed the capacity of the State public housing authorities.

The Australian Council of Social Services (ACOSS)

In June 1994 ACOSS in conjunction with National Shelter (the peak body of welfare housing organisations) held a national workshop for housing workers and tenants. Following the workshop ACOSS released an issues paper on public housing which contained a number of suggested reforms designed to improve the provision of that type of housing. Some of the main comments and suggestions for reform contained in the ACOSS paper were:

  • that the Commonwealth-State Housing Agreement (CSHA) continue to be the core vehicle for the provision of public housing :
...the CSHA should be the framework for a nationally coordinated housing policy which enables affordable, appropriate and secure housing to be provided to low income and special needs in nationally uniform manner.(22)
  • that within the CSHA framework there be an allowance for variation in housing design due to factors such as differing local needs and cultural preferences.
  • that recent governmental moves towards the introduction of performance based agreements related to the objectives of the CSHA be supported :
Objectives should be complemented by agreed performance measures which clearly identify commonwealth and state responsibilities. To maintain their relevance, the effectiveness of strategies to meet objectives should also be reviewed regularly.(23)
  • that the performance data used in relation to the indicators should be 'clear, reliable and nationally comparable'.
In addition to being assessed according to factors such as stock condition, rates of stock acquisition, and financial and other aspects of stock and asset management, housing agency performance should be assessed according to: ability to meet housing need; client satisfaction - energy efficiency; appropriateness of location; design quality; accessibility to applicants; extent to which special needs groups are met; affordability.(24)
  • that in terms of stock management there are two main priorities: first, the need to redevelop inappropriately located housing stock and stock that is in poor condition; and second, the need to make better use of existing stock.
The CSHA should establish national asset management and maintenance guidelines and benchmarks to minimise any potential conflict between asset management and quality of service objectives.(25)
  • that the needs of tenants be better addressed including the introduction of local tenancy management and the provision of nationally uniform appeals mechanisms and tenancy legislation.
  • that segmented waiting lists (as recommended by the Industry Commission) not be introduced. At present there are wait-turn allocation policies for public housing, which essentially means that those longest on the waiting list are allocated accommodation ahead of those who have only recently been listed. Segmented lists would allocate tenants to housing according to assessed needs. ACOSS believes such a change would not address the fundamental problem of there not being enough housing stock to go around. It also believes that higher administration charges would result from the introduction of segmented waiting lists.
  • that the present provision of housing for Aboriginal and Torres Strait Islander people is 'grossly inadequate'.(26) Not only are more resources required to overcome this situation, but there is a need for greater self-determination with possibly the Aboriginal and Torres Strait Islander Commission playing a coordinating role. The provision of housing assistance should be part of an integrated package rather than housing being seen as a separate infrastructure need.
  • that there be more transparency with respect to subsidies paid to all forms of housing tenure and that the level of support for public housing should be greater than that for other forms of tenure.
  • that the cost of support services should be met by other agencies as appropriate, not by housing agencies.
  • that differential rents for public housing, as proposed by the Industry Commission, be rejected. The Industry Commission was of the view that higher rents should be charged for housing in more expensive locations and for better types of housing.
  • that the Industry Commission proposal to charge a premium of 2-3% over market rents for public housing be rejected.
  • that with respect to Commonwealth and State roles and responsibilities there be a clear delineation of roles with the Commonwealth playing the main role in terms of funding, planning and performance monitoring whilst the States 'should be responsible for ensuring that property management, tenancy services and asset management are undertaken to multi-laterally agreed national standards'.(27)

The National Housing Strategy

The National Housing Strategy (NHS) was a two and a half year review of housing needs and policies. It culminated with the publication of 'Agenda for Action' in December 1992.

The NHS dealt with housing across the board and not just the provision of public housing. It identified three pre-conditions for reforming the housing sector in Australia:

...the need to formulate an integrated set of proposals to ensure more affordable housing choices; the need to cement cooperative and coordinated relationships between the three spheres of government, involving the industry and community; and the need to provide adequate resources for housing and infrastructure'.(28)

In the longer term the NHS argued that the CSHA should be more responsive to the housing needs of particular groups; that local governments, community groups and tenants should be more directly involved in the decision making process; and that CSHA financing should be drawn from a wider pool. The NHS also argued for the introduction of performance indicators against which State housing authorities could be judged. As well, the Strategy endorsed a 'housing affordability benchmark' and emphasised the need for better links between housing and support services. It also advocated that flexibility was needed in the provision of different types of housing tenure.

The Australian Institute of Health and Welfare

The Institute's report on public housing was released in January 1995 and many of its main concerns and points have been referred to earlier in this paper. However, it is worth noting the overall conclusion that the Institute made on the provision of public housing:

Although assessing performance is always a subjective exercise (to some degree), based on the measures used in this report, it is considered that public housing is achieving better outcomes for tenants than the private rental sector in most of the areas examined. The public sector performs better than the private rental sector in providing affordable housing, alleviating poverty, providing adequate dwellings (at least in terms of dwelling amenities and a lower incidence of overcrowding), minimising the under-utilisation of houses, and in providing security of tenure for tenants. It does not perform as well with respect to facilitating access to services and employment, providing housing choice and in meeting demand.(29)

Recent Moves towards Reform

The Keating Government

Recent proposals for public housing reform have been largely driven by the Council of Australian Governments (COAG) process. At a meeting of State Premiers and the Commonwealth held in April 1995 it was agreed that there should be a major overhaul of the public housing system, an overhaul that includes many of the proposals for change advocated by the various reports and studies done in the early to mid-1990s.

The Report on Government Service Provision released by the Steering Committee for the Review of Commonwealth/State Service Provision in December 1995 summed up the moves towards reform of public housing current at that time:

The Commonwealth, State and Territory Governments are working to reform the planning and delivery of housing assistance provided through the CSHA, under the auspices of the Council of Australian Governments (COAG).

During 1995-96, re-negotiation of the CSHA is intended to be a major strategy in assisting people - particularly those on low to moderate incomes - to improve access to affordable housing.

Proposed reforms to the CSHA include:

  • clearer roles and responsibilities for the Commonwealth, State and Territory governments, with increased flexibility for jurisdictions to invest in resources across a mix of housing assistance;
  • measures to improve the transparency of financial arrangements;
  • an outcomes focus with agreed measures of performance, including an agreed needs methodology as a key input into planning and setting targets;
  • a clearer emphasis on commercial management of housing stock, and diversification of supply and providers;
  • potential for contestability of supply; and
  • consumer choice in the type(s) of assistance.(30)

At about the same time as the Government Service Provision Report was released, the then Prime Minister (Mr Keating) and the then Commonwealth Housing Minister (Mr Howe) released a far-reaching set of proposed reforms to public housing. The main thrust of these reforms included the Commonwealth taking full responsibility for all rent assistance (including rent assistance to both private and public renters) with the States and the private sector being responsible for the supply of public housing in their respective jurisdictions. This essentially would see the Commonwealth combine the approximately $1.1 billion it spent annually on CSHA programs and the approximately $1.4 billion it spent annually on rent assistance into one private and public rent assistance program. The proposed reforms also included a provision to allow rent assistance to be converted to a lump sum to be used as a deposit for home purchase; greater private sector involvement in the provision of public housing; a reduction in housing industry regulations; an 'evening out' of the subsidy provided to private and public renters; and differential rates of rental assistance depending on geographical location and state of the real estate market.(31)

The Howard Government

The general thrust of the housing reforms proposed by the Keating Government were picked up by the incoming Howard Government in March 1996.(32) In September of that year the Housing Ministers from the Commonwealth and the States and Territories agreed to continue with the reforms including a commitment that all new public housing tenants should be asked to pay no more than 25% of their incomes in rent and that no existing public housing tenants should be disadvantaged by the new reforms. The Ministers also agreed that neither level of Government should be disadvantaged and that the proposed reforms should be revenue neutral.(33)

According to Senator Newman, the Minister for Social Security, whose portfolio includes public housing, the main reasons why the new proposals will lead to a better system include:

  • the changes will lead to a fairer system - private and public renters will be entitled to the same levels of financial help for renting;
  • there will be less pressure on public housing waiting lists, thus 'freeing up' some public housing for people with special needs - for example, people with disabilities;
  • renters will have greater housing choices - for example, people will be able to move to areas where there are better amenities and more chance of a job;
  • private renters will get increases in social security Rent Assistance payments;
  • the housing roles and responsibilities of the Commonwealth and State Governments will be more clearly defined, leading to improved accountability; and
  • the States are in the best position to assess, plan and deliver local housing needs.(34)

It is difficult to estimate the actual effects of the proposed reforms when little detail is available, but it would appear that the biggest advantage of the new arrangements, assuming that the total amount of housing stock available for rental purposes either remains the same or grows after these reforms are implemented, is that they will allow greater choice for tenants. Public housing tenants now on lengthy waiting lists may be able to rent in the private sector using their rent assistance payment, and they will have the option of being more mobile (for example, moving interstate) and following the geographical locations that offer the best employment prospects.

As well, it is argued that an important equity consideration is addressed by the proposed reforms. The changes will see private renters get more support than they have in the past when compared to the level of support given to those in the public housing sector. At present, public tenants receive an average of approximately $4 000 per annum in assistance compared to an average level of assistance of $1 500 per annum for private renters via rent assistance.(35) However, this move towards greater equity does raise a question in relation to funding of the new reforms. As was mentioned earlier, the Commonwealth Government has promised that under the new arrangements no new public housing tenants will pay more than 25% of their incomes in rent and existing public housing tenants will not be worse off. Given this promise and the fact that private rent assistance is also due to increase substantially, it may be difficult for the Commonwealth to ensure that reforms are revenue neutral.

The new arrangements would also see a much clearer delineation of roles and responsibilities between the Commonwealth and the States and should lessen many of the current problems related to overlapping responsibilities and lack of clarity about respective roles that have been highlighted by several reports on the operation of the CSHA.

However, critics of the reforms point to the possibility of some serious shortcomings with the new arrangements. Of particular concern is the fact that security of tenure, which has been a strength of public housing to date, will not be as readily available to as many tenants, particularly those who transfer from the public to the private sector. Disadvantaged groups such as Aboriginal and Torres Strait Islanders, the disabled and single parents, which have traditionally relied on the public sector for housing, may encounter increased discrimination and not find the private sector as 'accommodating' as the public sector alternative. There are likely to be ways for landlords/agents to avoid such persons as customers without running the risk of clearly violating anti-discrimination provisions. This sort of problem, which already exists in some areas, could be exacerbated if disadvantaged groups have to rely more on the private rental market for accommodation than has been the case so far.

There is also the possibility, in the absence of rent control, of private landlords pushing up rents, particularly in housing sub-markets where there is a general shortage of available accommodation. This could become a big problem in the event of any State or Territory sell off of their current stock of public housing. If there is a substantial increase in the demand for low cost rental housing due to the large cash injection provided by the new rental assistance arrangement, then the temptation for landlords to increase rent will obviously be there.(36) Apart from the imposition of very politically unpopular rent controls there would appear to be very little that the various governments can do to make sure this will not happen.

An important point to note is that it appears to be highly likely that the new arrangements, if implemented, will have a differing impact not only on families experiencing differing economic and social circumstances but also in terms of geographical location. This means that the new system will need to be adaptable and flexible so that adjustments can be made if particular areas or families are in some way disadvantaged when the changes are implemented.

Conclusion

Notwithstanding earlier apparent agreement on the general thrust of the proposed changes, progress on the actual implementation of the reforms has been stalled - not least because the States and Territories now feel that they and their public housing tenants will not necessarily benefit from the changes as outlined to date. For example, the following resolution was agreed to by the State and Territory Housing Ministers at a meeting in Brisbane on 20 January this year:

State and Territory Housing Ministers meeting in Brisbane today reaffirmed their commitment to public housing for those in need and condemned any proposed cuts in public housing by the Federal Government. Ministers also condemned the Commonwealth's decision to fund State capital programs only until 31 December 1997, noting the immediate impact on the provision of public housing to the needy and the residential construction sector. Ministers reaffirmed their fundamental commitment to adequately house more low income, disadvantaged people in a more effective manner. The Ministers demanded that the Federal Government immediately guarantee funding at existing levels for the next two years while a housing reform process is being concluded. Ministers expressed concern that the federal reform agenda had stalled and they called on the Federal Government to recommence meaningful discussions with the States and Territories to progress national housing reform. Ministers had grave reservations about the proposed Commonwealth model for reform which totally replaces State capital funding with income assistance. As a demonstration of the States' and Territories' commitment to reform, Ministers today directed their officials to undertake a complete examination of pricing, eligibility and tenure policies as a matter of urgency. Ministers are confident that by pursuing theses recommendations services can be improved for those in need and also meet the objectives of national housing reform.(37)

The sentiment expressed in this Housing Ministers' resolution, combined with the fact that the Senate Community Affairs References Committee is currently holding an inquiry into the proposed reforms (with a reporting date of 30 September 1997), suggests that the stalemate over the changes may continue for some time, notwithstanding the fact the Commonwealth has now (in the context of the 1997-98 Budget) promised funding for the CSHA at least until the current interim arrangements expire in June 1999.

It is not only the Housing Ministers' from the various States and Territories that have expressed reservations about the proposed reforms to the public housing sector. Other groups and bodies have also expressed concerns about the Commonwealth's intentions. For example, National Shelter (the peak body representing consumers of public and community housing) oppose the proposed changes arguing that it would take a 'miracle' for the Government's plan to succeed. Monica Wolf, the executive director of National Shelter, estimates that the Government would need to put in an additional $2b to $2.5b into the public housing system if it is to keep its pledge upon coming to office of ensuring a continued supply of public housing, of ensuring that no public tenant would pay no more than 25% of their income in rent and implementing measures to reduce the poverty problem in the private rental market.(38)

Others have also expressed concern about the plan to shift money from public housing to rental subsidies in an attempt to help low income earners in the private rental sector. According to John Daziel, a spokesman for the Salvation Army, the proposal will discriminate against people who are jobless...'It will lead to landlords giving preference to renters who have jobs (and)...low income renters will not have the skills or powers to insist on their housing rights.' (39) For Don Siemon, the social policy coordinator for the Brotherhood of St Laurence, the choices that governments face were clear:

Are we prepared to develop a system which actively alleviates poverty and is a community asset for generations to come, or will we leave people with only a pension or unemployment allowance to their own devices in the chance that they can turn up a decent home at a rent they can afford through the market.(40)

The key challenge for the Commonwealth is to come up with an acceptable package that is adaptable and flexible enough to be able to take into account any unforeseen negative consequences that may arise from the reforms proposed. Some of the concerns raised about the proposed reforms, if they do eventuate, could see some people far worse off than they are now. If the new package, when it is agreed to, has allowances for future adjustments and 'fine tuning' then any shortcomings may be able to be addressed as they arise. This is particularly important given the arguments that the housing reforms are likely to affect different areas of Australia in different ways and that they are likely to have a different impact on people depending on their circumstances.

Endnotes

  1. National Housing Strategy, Agenda for Action, December 1992: 4.
  2. Department of Social Security, Housing Assistance Act 1989 Annual Report 1994-95, Canberra, AGPS, 1996: 1.
  3. As quoted in Industry Commission Report No. 34, Public Housing Volume 1, November 1993 : 24
  4. Department of Social Security op.cit.: 7
  5. ibid: 18-19.
  6. ibid: 47
  7. Figures provided by the Department of Social Security (Housing Division).
  8. Figures provided by the Department of Social Security (Housing Division).
  9. Department of Social Security, Portfolio Budget Statements 1996-97: 179.
  10. 1997-98 Budget Paper No.2 : 132
  11. ibid :132
  12. Recital D of the Housing Assistance Act 1989.
  13. Department of Social Security, Housing Assistance Act 1989 Annual Report 1994-95, op. cit.: 45-47.
  14. Australian Institute of Health and Welfare, Public Housing in Australia, Canberra, AGPS, 1994: 129-30.
  15. Department of Social Security, Housing Assistance Act 1989 Annual Report 1994-95, op. cit.: 58.
  16. Australian Institute of Health and Welfare, op. cit.: 115.
  17. Industry Commission, Public Housing, Canberra, AGPS, 1993: 10.
  18. ABS Cat. No. 4138.0, Renters in Australia, April 1994: 33.
  19. Australian Institute of Health and Welfare, op. cit.: 6.
  20. ABS Catalogue No. 4132.0, op. cit.: 27.
  21. Industry Commission, op. cit.: xv.
  22. Australian Council of Social Service, Issues and Options for Public Housing Reform (ACOSS Paper No. 67), Surry Hills, ACOSS, 1994: vi.
  23. ibid: vi.
  24. ibid: vii.
  25. loc. cit.
  26. ibid: viii.
  27. ibid: x.
  28. National Housing Strategy, Agenda for Action, December 1992: ix
  29. Australian Institute of Health and Welfare, op. cit.: 7
  30. Steering Committee for the Review of Commonwealth-State Service Provision, Report on Government Service Provision, December 1995: 127-8.
  31. Australian Financial Review, 11-12 December 1996.
  32. For example, see Senator Jocelyn Newman, Information - Housing Reform, Media release 23 September 1996
  33. Senator Jocelyn Newman, Housing Ministers' Conference, Media release, 20 September 1996.
  34. Senator Jocelyn Newman, Housing Reform Kit, 24 September 1996.
  35. ibid.
  36. For example, see Stan Sharkey and Chris Sheil, 'Housing Reform an Illusion', Australian Financial Review, 25 November 1996
  37. Obtained through the Info Xchange on the Internet at http://infoxchange.net.au.
  38. Canberra Times, 17 August 1996
  39. Age, 1 August 1996
  40. ibid, 1 August 1996


Appendix: Commonwealth Housing Reform Facts and Figures

The information in this Appendix is taken from the Housing Reform Kit released by the Department of Social Security on 20 September 1996.

Annual Commonwealth State Housing Agreement Expenditure on Housing Assistance 1995-96


Table 1: CSHA Expenditure by State/Territory 1995-96


$m (rounded)    NSW     Vic    Qld     WA     SA      Tas    ACT    NT    Total   

Commonwealth    343.5   243    200.8   108.3   86.5   29.6   21.2   34.8  1 068   
contribution                                                                      

State           142.3   105     75.7    40     34.4   12.9    9.6    7      427   
contribution                                                                      

Total           485.8   347.9  276.4   148.4  120.8   42.5   30.8   41.8  1 495   



Private renters

  • Total annual Commonwealth payments on Rent Assistance are $1.6 billion.
  • About 20 per cent of Australian households (nearly 1.47 million) rent privately. Of these, around 45 per cent receive Rent Assistance payments as individuals and families.
  • Rent Assistance is paid to recipients of DSS pensions, allowances and family payment for low income working families who rent in the private rental market. Assistance is only paid where private rents exceed minimum thresholds (which currently range from $37.30 per week for singles and $49.20 for families with children).
  • There is no variation in the current Rent Assistance payments to provide for those living in higher housing cost areas e.g. Sydney.
  • Some 43 per cent of individuals and families receiving Rent Assistance pay more than 30 per cent of their income in rent.
  • Each year an additional 140 000 private dwellings come onto the private housing market.
  • Average annual Rent Assistance is $1 500 per recipient.
  • Vacancy rates vary by location and move in a cyclical pattern. Vacancy rates by major city are outlined in Table 2.

Table 2: Private Rental Vacancy Rates by Capital City


City         Average vacancy rate  City       Average vacancy rate   

Sydney       1.4%                  Perth      4.3%                   

Melbourne    2.1%                  Hobart     5.6%                   

Brisbane     5.1%                  Canberra   4.7%                   

Adelaide     4.3%                  Darwin     4.3%                   



Source: REIA Market Facts April 1996

  • The Real Estate Institute of Australia considers that a rental market is in equilibrium with a vacancy rate of around 3%. Vacancy rates in Sydney are improving and in Melbourne have bottomed out.

Public Housing

  • In 1995-96 an estimated 386 000 public rental households.
  • In 1995-96, an estimated 337 000 households received public housing rebated rents ('subsidies')-rents are generally set at around 20 to 25 per cent of household gross income. Less than 15 per cent of public tenants pay full market rent.
  • The national public housing stock is worth $34 billion and is managed by State/Territory Housing Authorities.
  • Average annual public housing subsidy per household is $4 000.
  • In the 1994-95 financial year only some 5 000 public housing dwellings were added to public housing stock for the $1.5 billion expenditure in the Program compared with 14 000 acquisitions in 1989.
  • Waiting times for public housing vary from State to State. The highest is NSW where some applicants have been waiting 10 years. Many of these waiting lists allocate housing on the basis of length of wait, rather than relative need. Once families gain access to public housing they are able to remain irrespective of their income.
  • In 1994-95, 235 000 people were on public housing waiting lists.

Table 3: Net Changes to Waiting Lists for Public Rental Housing 1994-95


                 NSW     Vic     Qld     WA      SA      Tas    ACT    NT     Aust.   

Waiting list   87 171  49 259  27 699  14 348  40 205  3 834  7 072  5 784  235 372     
at 1/7/94                                                                             

Applicants     29 130  18 331  14 799  13 157  12 153  5 300  5 342  2 827  103  416   
added                                                                             

Applicants     17 104  6 481   3 910   6 815   6 822   3 400  2 604  2 196   49 332  
cancelled or                                                                          
withdrawn                                                                             

Dwellings      10 998  9 421   10 065  7 353   8 072   2 772  2 479  1 323   52 483  
allocated to                                                                          
those on                                                                              
waiting list                                                                          

Waiting list   88 199  51 688  28 523  13 337  37 464  2 962  7 331  5 092  234 596   
at 30/6/95                                                                           

Allocations of  1 745   2 400     970     961   1 173    447    799    204    8 699   
Emergency/                                                                            
Priority                                                                              
Accommodation                                                                         
(included in                                                                          
above)                                                                                

Proportion of     15.9    25.5    9.6     13.1    14.5    16.1   32.2   15.4   16.6    
all allocations                                                                       
made on a                                                                             
priority basis                                                                        
(%)                                                                                   



Source: Housing Assistance Act 1989 Annual Report 1994-95

Comparison of Subsidies for Public Housing and Private Rental Assistance

  • The current system substantially advantages public housing tenants. While private renters receive an annual subsidy of around $1 500 a year public households receive an average annual subsidy of $4 000.
  • Under the current arrangements the gap between these two subsidy levels grows annually as redevelopment and upgrading of public housing stock increases the subsidy differential.

Table 4: Private and Public Renters Subsidy Differentials


             Median Rent*     Private Renter     Public Renter      
                              (Rent Assistance)  (Rent Rebate)      

Sydney       $180 pw          $43.00 pw          $112.00 pw         

Melbourne    $150 pw          $43.00 pw          $82.00 pw          

Perth        $130 pw          $43.00 pw          $59.00 pw          



*Median rents as reflected in the ABS rental tenants survey 1994. (Unemployed couple with 2 dependent children renting a three bedroom median priced dwelling)